SMM Morning Comment For SHFE Base Metals (September 2)

SHANGHAI, September 2 (SMM) -

Copper

Overnight, LME copper opened and touched a high of $9,916.5/mt before fluctuating downward to close at the day's low of $9,875/mt, down 0.31%, with trading volume at 10,000 lots and open interest at 269,000 lots. The most-traded SHFE copper 2510 contract opened at 79,640 yuan/mt, initially touched a high of 79,810 yuan/mt, then fluctuated downward to a low of 79,560 yuan/mt before consolidating sideways to close at 79,660 yuan/mt, down 0.06%, with trading volume at 16,000 lots and open interest at 179,000 lots.

On the macro front, US Treasury Secretary Beshent stated that Trump may declare a national housing emergency this autumn, with potential measures including tariff exemptions on construction materials, and expressed confidence that the Supreme Court would uphold his tariff policies. Meanwhile, the US Fed is expected to welcome new governor Stephen Milan. Additionally, the US government is pushing to leverage AI for significant cuts in financial regulations, which may heighten market volatility. Currently, the macro landscape lacks fresh catalysts, with attention turning to tonight's release of the final US S&P Global Manufacturing PMI data.

Fundamentally, supply remained stable with normal arrivals of both imported and domestic copper cathode, keeping market supply relatively ample. Demand side showed weakness as high copper prices dampened downstream purchase willingness, fostering cautious market sentiment. As of Monday, September 1, SMM-reported mainstream copper inventories across China rose 5,000 mt WoW to 132,100 mt.

Overall, with no immediate macro drivers and fundamentals reflecting ample supply against tepid demand, copper prices are expected to encounter resistance today.

Aluminum

Futures: During the previous night session, the most-traded SHFE aluminum 2510 contract opened at 20,650 yuan/mt, with the highest price at 20,730 yuan/mt, the lowest at 20,640 yuan/mt, and closed at 20,690 yuan/mt, up 0.22% from the previous closing price. Trading volume was 38,000 lots, and open interest stood at 218,000 lots. The previous LME session opened at $2,614/mt, reached a high of $2,620/mt, a low of $2,605/mt, and closed at $2,619.5/mt.

Summary: Macro front, expectations for US Fed interest rate cuts and potential US housing stimulus policies, coupled with China's intensified policies to boost domestic demand, collectively create a favorable atmosphere, which is expected to enhance the aluminum consumption outlook. However, it will take time for domestic supportive policies to translate into actual consumption. Fundamentally, supply side, with the commissioning of a small amount of replacement capacity, operating capacity is stable with a slight increase, and production is growing marginally. The proportion of liquid aluminum is expected to rebound in September. Cost side, the weekly total cost of the aluminum industry changed minimally, and high industry profits remain. Demand side remains the core focus for the market going forward. As the September-October peak season approaches, downstream weekly operating rates showed stronger signs of recovery last week, with operating rates in sectors such as aluminum extrusion and aluminum plate/sheet, strip and foil all increasing to some extent. Entering early September, consumption is only showing marginal improvement at present, and it will take time for inventory to achieve effective destocking. However, current total inventory is not high, and some secondary aluminum enterprises in provinces such as Anhui and Jiangxi have received notices of termination of tax rebate policies, posing a risk of declining capacity utilization rates for scrap utilization enterprises, which provides some support for primary aluminum consumption. During the traditional peak season in September, aluminum prices are overall more likely to rise than fall, but upside resistance remains. For aluminum prices to effectively break through the important resistance level of 21,000 yuan/mt, it will require the realization of expectations for the September-October peak season in aluminum consumption, and verification through the subsequent emergence of a destocking inflection point for domestic aluminum ingots and sustained strength in downstream operating performance.

Lead

Overnight, LME lead opened at $1,994/mt, fluctuated downward during the Asian session, and touched a low of $1,986/mt in the European session. However, it rebounded due to the weak US dollar and finally closed at a high of $2,007/mt, up 0.5%.

Overnight, the most-traded SHFE lead 2510 contract opened at 16,875 yuan/mt, initially dipped to 16,840 yuan/mt before fluctuating upward. As the scale of production cuts at domestic secondary lead smelters expanded, bulls increased positions, driving the contract to a high of 16,950 yuan/mt before closing at 16,930 yuan/mt, up 0.53%.

Recently, the traditional peak season for the lead-acid battery market has been lackluster, with most battery manufacturers maintaining a produce-based-on-sales model and purchasing raw material lead as needed. Additionally, lead prices have been consolidating at high levels, prompting downstream enterprises to exercise caution in purchasing "high-priced lead," resulting in sluggish spot market transactions. From late August to early September, events such as the Tianjin SCO Summit and Beijing military parade are underway, restricting vehicle transportation in parts of North and Central China. This has prolonged lead ingot delivery cycles for smelters and reduced cargo flows to social warehouses, leading to relatively small social inventory changes. However, it is noteworthy that in-plant inventories at some lead smelters have already accumulated. Once transportation restrictions are lifted, if consumption still shows no significant improvement, there is a risk of accumulation in lead ingot social inventory, which could weigh on lead price trends.

Zinc

Futures: Overnight, LME zinc opened at $2,818.5/mt. Initially, LME zinc oscillated around the daily average line. During European trading hours, its center moved up to $2,835/mt, hitting a high of $2,840/mt. Entering the night session, the center dropped below the daily average line before bulls pushed it back above the line, finally closing up at $2,833/mt, a gain of $19/mt or 0.68%. Trading volume decreased to 7,410 lots, and open interest increased by 1,018 lots to 193,000 lots. Overnight, the most-traded SHFE zinc 2510 contract opened at 22,175 yuan/mt. After briefly hitting 22,250 yuan/mt early, its center dropped to around 22,195 yuan/mt and finally closed up at 22,195 yuan/mt, a gain of 20 yuan/mt or 0.09%. Trading volume decreased to 36,354 lots, and open interest decreased by 1,043 lots to 115,000 lots.

Zinc price outlook: LME zinc posted a three-day winning streak overnight, with the center of daily candlestick rising and multiple moving averages providing support below. Overnight, the US dollar index declined amid heightened expectations for US Fed interest rate cuts and independence concerns, coupled with continuous LME inventory drawdowns. The LME 0-3 backwardation structure widened to 14.9, with increased fund concentration, driving LME zinc to fluctuate upward. SHFE zinc ended its losing streak and turned positive overnight, with the KDJ indicator expanding upward. Domestic social inventory rose again, lacking upward momentum. With LME outperforming SHFE, the SHFE/LME price ratio further corrected downward. Zinc prices are expected to remain range-bound, with attention on overseas geopolitical developments and fund flows.

Tin

Futures: The most-traded SHFE tin contract (SN2510) edged up to 275,000 yuan/mt during the night session before maintaining a fluctuating trend around 274,000 yuan/mt, closing at 274,300 yuan/mt, up 0.2% from the previous trading day.

Macro: (1) According to the latest survey by TrendForce, the overall wafer foundry capacity utilization rate and shipments strengthened in Q2 2025 due to the stockpiling effect triggered by consumption subsidies in the Chinese market, as well as demand for new smartphone, notebook/PC, and server products in H2. This drove the combined revenue of the world's top 10 wafer foundries to over $41.7 billion, a record quarterly increase of 14.6%. In Q3, the main growth momentum for wafer foundries comes from seasonal procurement of new products. Advanced processes are receiving orders for main chips of upcoming new products, with high-priced wafers significantly boosting industry revenue. Mature processes are also supported by peripheral IC orders. The industry's overall capacity utilization rate is expected to rise compared to the previous quarter, driving continued sequential revenue growth. (2) TSMC is considering raising prices for all its high-end process technologies by 5%-10% in 2026 to offset US tariffs, exchange rate fluctuations, and supply chain price pressures. TSMC has communicated the higher 2026 pricing to its foundry partners, including processes such as 5nm/4nm, 3nm, and 2nm. This means major clients of TSMC's high-end processes, such as NVIDIA and Apple, will now need to pay higher costs for chips. (3) Tariffs - ①Trump: India has now proposed reducing tariffs to zero, but it's too late. India should have done this years ago. ②Sources: India plans to lower the goods and services tax on about 175 items. ③Besant: Trump may declare a national housing emergency this fall, with potential measures including exemptions for building materials. Confident the Supreme Court will uphold Trump's tariff policies.

Fundamentals: (1) Supply-side disruptions: Tin ore supply is tightening in major production areas such as Yunnan, with some smelters remaining under maintenance in September (Bullish★). (2) Demand side: PV industry: After the installation rush, tin bar orders for PV in east China declined, with operating rates dropping at some producers. Electronics industry: Electronics end-users in south China entered the off-season, compounded by high tin prices, resulting in strong wait-and-see sentiment and orders meeting only essential needs. Other sectors: Demand remained stable in areas such as tinplate and chemicals, without exceeding expectations.

Spot market: Overall spot market transactions recovered slightly compared to last Friday, with some traders reporting shipments of 10-20 mt. However, given that prices remain high at 270,000 yuan, some downstream and end-users maintain a wait-and-see stance.